Calif. thrift to acquire Custom Household Bank will gain deposits

January 06, 1993|By Kim Clark | Kim Clark,Staff Writer

The owners of Pikesville-based Custom Savings Bank signe an agreement yesterday to sell its deposits to Household Bank, a rapidly growing, California-based thrift.

John Moran, president of Household's Eastern Division, said his thrift agreed to acquire Custom's approximately $220 million in deposits and indirectly the business of Custom's depositors.

All deposits continue to be guaranteed by the federal government and all deposits will continue to earn their promised rates of interest, Mr. Moran said.

The thrift's three branches will be closed after the transaction is completed, which is expected in the spring, but the offices will remain open until then. Household was not interested in running Custom's three branches because it already has 39 branches in the Baltimore-Washington area, Mr. Moran said.

Officials at both thrifts refused to disclose terms of the transaction, saying only that it awaits federal approval and would probably be completed in the spring.

Michael H. Renbaum, president of privately owned Custom, said he and the other owners, whom he declined to name, had decided to sell the deposits because they felt it was difficult for "a small institution to compete with mega-institutions."

Mr. Renbaum said the owners chose Household because it was a "very large, very safe operation" and would be good for Custom's depositors.

Household was "one of several opportunities we examined," Mr. Renbaum said.

Household, based in Newport Beach, Calif., has $8 billion in assets nationwide, and more than $1 billion in assets in its Eastern Division. More than 600 of Household's 2,700 employees are in the Eastern Division.

Mr. Renbaum, whose family took over the 28-year-old thrift in the mid-1970s, said he had "great concern about our employees. I hope Household will take a look at our folks."

Household has agreed to interview all Custom employees, and will need additional employees to serve Custom's business, Mr. Moran said. Custom has 25 employees, according to Veribanc Inc., a Massachusetts-based bank rating service.

Custom had become well known for paying some of the highest rates nationally for deposits. Financial Rates Inc., a Florida-based trade publisher that analyzes interest rates paid at savings institutions nationwide, has consistently listed Custom as one of the best-paying banks.

In its most recent Jumbo Flash Report, which ranks yields on accounts holding more than $100,000, Custom is listed as paying the 13th-highest rate in the nation for money market accounts. Household has not appeared on the lists of high-paying thrifts.

Despite paying high interest rates, Custom is also one of the most profitable and safest thrifts in the country, according to Veribanc. Veribanc's latest report, which covers the period that ended June 30, showed that Custom paid its depositors an average of 4.77 percent on its deposits.

But the thrift earned an average of 10.65 percent on its investments. Veribanc said the average thrift earned 8.84 percent on its investments in the second quarter of 1992.

Veribanc's report indicated that Custom made its money by investing almost entirely in securities -- and making almost no loans.

The thrift, which had about $288 million in assets, held virtually the entire amount in mortgage-backed securities. Mortgage loans held by the thrift totaled only $307,000 as of June 30.

Custom Savings' assets were not involved in the transaction with Household.

Veribanc estimated Custom's 1992 profit at about $7.8 million, which would have given the thrift a return on assets of 2.7 percent, a highly profitable rate.

The Custom purchase is the eighth acquisition that Household has made in the region since starting business here in 1984.

Among Household's better-known purchases were Sharon Savings Bank, Baltimore Federal Financial and Yorkridge-Calvert Federal Savings.

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